November 26, 2018 / 10:00 AM / in 18 days

China's Tingyi profit jumps, but says raw material costs a challenge

HONG KONG, Nov 26 (Reuters) - Tingyi Cayman Islands Holding Corp, a Chinese partner of Starbucks and PepsiCo, reported a 25.5 percent jump in quarterly profit on Monday, but said its beverages business was facing challenges from higher raw material costs and Sino-U.S. trade tensions.

The Master Kong brand owner said profit rose to 1.55 billion yuan ($223.51 million) in the third quarter ended September, from 1.24 billion yuan in the year-earlier quarter. The profit growth rate slowed from 30 percent reported in the year-earlier quarter.

Revenue fell 4.2 percent to 18.86 billion yuan during the September quarter. However, gross profit margin edged higher by 0.87 percentage point to 33.37 percent year-on-year.

“Amidst changing consumer behaviors, fragmenting channels and hovering price of certain raw materials under new economic environment, it is expected that the instant noodle business will develop steadily while the beverage business will still suffer from the pain of business model adjustment in the short-term,” Tingyi Chairman Wei Ing-Chou said in an exchange filing.

Growth in instant noodle and beverage businesses slowed down from a year earlier as sales channel fragmentation continued due to a rapid growth in e-commerce and new retail channels, Tingyi said.

Volatile financial markets and exchange rate changes also added challenges, the company said.

China’s food and beverages industry has been pressured by slowing world economic growth and uncertainties related to the ongoing trade conflict between Washington and Beijing, Wei said.

In the first nine months, the company’s profit jumped 47.6 percent to 2.86 billion yuan, while revenue rose 3.3 percent to 49.86 billion yuan.

Earlier this month, smaller rival Uni-President China posted a 9 percent growth in third-quarter profit, slowing from a 15 percent growth in the second quarter.

$1 = 6.9348 Chinese yuan Reporting by Donny Kwok; Editing by Amrutha Gayathri

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